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good afternoon or good morning depending upon where you are and welcome to the nobles presentation of banking marijuana a primer for banks financial service companies and cannabis merchants the voice you're hearing now is in Wilson I'm joined by my partner Michael Bresnik you should see our pictures on the screen and the next slide will show kind of our backgrounds prior to getting here we've both taken interesting tasks of interesting ways to get here Michael more on the enforcement side I'm more on the regulatory side and it's bringing those two things together that really made us decide it was an opportune time for us to put on this particular presentation our agenda today starts with in an overview statement and it says reality we're all in this together Michael and I come to this along with a number of attorneys Inventables from a a deep background in the payments world that's every form of moving value and money around our country and across the globe and what we're finding particularly borrowing from the money transmitter world is that the customers of financial institutions need to appreciate the reality that they're in and if people in the in the money transmitter will think that's the case it's not even close to what the reality is in the marijuana world so what we're going to do today is spend a few minutes doing a legal overview of marijuana financial laws application the ante money laundering laws to marijuana banking and as you listen the idea here is to say how do the laws apply to banking means how do they apply to every other segment of the marijuana industry so that they can be engaged with banks the impact of safety and soundness concerns risk-based approach that hopefully satisfies both and best practices Michael would you like to start us off with some basics yes hello everybody this is Michael Bresnik so some basics is always a good first place to start I think this page should not come as any surprise to anybody who's too the end of this but it always bears repeating that marijuana is still a schedule 1 controlled substance it is a violation of federal law to to sell distribute marijuana the DEA is considering rescheduling marijuana there may be changes legislative changes that come up in the future but right now it is important to remember that it is a violation of federal law to sell of marijuana of course the BSA the Bank Secrecy Act and other criminal statutes do make it illegal to provide banking and financial services to businesses involved with legal activities including sale of marijuana but and another reason why we're all here today is there's been a sea change lately now we have 25 states in DC that have laws legalizing marijuana whether recreational or medicinal or both in some form 30 states require or go by county by county so the state may have authorized it but it is dependent on the particular county within each state whether they're going to allow it or not and it we see that the change is continuing because of the ballots in the November this year on various states are seeking to continue this key change and we see that for example California and other states are looking to add it as an authorized purpose for recreational use and then of course we have the federal guidance we have the Cole memo which came out in August of 2013 and again in February 2014 we have pin pen guides that came out simultaneous with a second Cole memo and 20th February 2014 and then we have the regulator statements from the OCC and the FDIC in various states that has signed on this and it before getting involved in this industry well if you are already involved in this industry it is important is imperative that you are familiar with each of these each of the guidance and the laws in your various state because you're going to walk into a minefield with you if you don't so ah probably Amazon is yet what's a bank to do the purpose of this slide will need to show kind of how we're all grappling with this industry and how we bank it how we use it in a ansel services area and it starts really with what I thought was one of the most impressive set of offensive testimony was the sheriff in King County Washington Seattle in September of 2013 where he said in addition to the quote we put at the top there that he was not in favor of the change in law but it was now the law of the land and he of his land that is Washington and he needed to find a way to make sure it was done legitimately and safely for all concerned and he took out and said the federal government needs to find a way to allow banks to work with legitimate marijuana businesses in it in his state and then we've got a series of statements from during every FDIC director and then these two great ones from dan stefano is a wonderful guy in november of 14 and november 15 in 14 says he's saying at least on a theoretical level if you sell marijuana regardless of whether it's legal and you deposit the money in a financial institution at least theoretically you can see was kind of fighting over his words here you can say that's money laundering and then a year later he's saying probably the best advice we could give if you were a bank and you have marijuana related businesses as customers you should follow it you should follow back FinCEN guidance because i think that would help to protect you which goes back then to representative blumenau who says paraphrasing the sheriff of Kings County forcing legal businesses to be conducted on an all case basis is politely insane that's what we're really here to discuss today is what's a bank to do when we think our theory here is it's not just what is the bank to do it's what each participant in the industry must do in order to have safe banking let's start with a review of the law Michael all right well so here is the the Cole memo the Cole memo again came out in August of 2013 and again separate 2014 be August of 2013 memo is significant and this is the first public statement by DOJ in which they express what their enforcement priorities are going to be with respect to the banking with respect to marijuana related businesses in light of the variety of states that came to authorize it on their state ballots now the poll memo in August of 2013 begins again by reiterating that marijuana is a dangerous drug and that illegal distribution and sales it is a crime again so that's a significant point but you did say in this memo that DOJ has limited resources and in furtherance of those limited resources and the priorities of the Department of Justice they did not expect a plan to use their enforcement authority against marijuana related businesses if 8 separate factors are met and these are the eight factors that are listed on this slide right here I'm not going to read them all but again you should read them yourselves and become familiar with them I do think it's worth pointing out if you look at the very first point it says preventing the distribution of marijuana to minors well that sounds simple enough in theory and you might just expect that the marijuana merchant might just have an ID check and that would be good enough but there is a footnote in the Cole memo with respect to this point that says a business that has marketing of marijuana related products in a manner that's appealable to minors might be violative of this particular point so their DOJ is is requiring you to look at the marketing materials to see whether or not this factor this priority is met and what about dij is going to use its enforcement authority one of the things we'll get into in the later slides particularly start with the Nexen which talks about $0.10 but I'd like to stay on this one for a second is the fencin slides give you a checklist of what you have to do but what the Cole memo does by emphasizing the ADA enforcement priorities should take any bank and any merchant or any person in the in the marijuana industry to say for example with the one Michael stated what is my customer by the bank or if I'm a merchant one of my policies to prevent the distribution of marijuana to minors and how do I show those to my bank how do I make sure that they're there in public so it's not just aren't just the Justice Department's factors enforcement priorities they are regulatory priorities that should be incorporated into your compliance plan that's right and it's also worth noting that the second Cole memo in February of 2014 is specific to financial crimes such as money-laundering unlicensed money transmitters in the Bank Secrecy Act and then that second memo Jim Cole who I worked for when I was in the Justice Department said that it is essential that financial institutions adhere to the FinCEN guidance and here's a fence on guidance I came out on the same day so you can see the coordination between Fenton and DOJ they are writing this together and this was some guides when I read it it could give me it give me a small bit of comfort and that looked inside and DOJ are really doing their best to make the laws clear to financial institutions and try to give them some comfort the pin some guidance begins by saying this clarifies how financial institutions can provide services to marijuana related businesses consistent with a BSA obligations they're going out of their way to say a banks financial institutions here's how you can serve this industry you know they also say that there's a decision to open an account it should be made by each financial institution and the factors include the business objectives evaluation of risks and the ability to manage those risks so that language is it should come as no surprise to anybody involved of banks or other financial services companies because that's what you do anytime you open an account you're looking at the risks and whether you can manage those risks so looking at the fencin guidance it notes that the financial institution should conduct thorough due diligence and that due diligence includes while what we have listed on the page here today one thing I think pointing out of the second bullet point it says reviewing the license application and related documentation submitted by the business for obtaining a state license so it's not enough just to see that the motion that you're considering opening has a license from your state the fencin also wants you to look at the underlying document that supported that license the related documentation and of course ongoing monitoring and for suspicious activity and so on we're going to get into that more as we go on what the fencin guides also did was it pointed out that yes marijuana Phillip edirol crime still illegal under federal law to service at that industry but what they did was they they change the star filing process with this industry to have three separate sarees that you could file marijuana limited marijuana priority marijuana termination and we'll discuss those right now marijuana limited is a SAR that you're supposed to file when you when you as a financial institution reasonably believe based on your due diligence that the account for the merchant you're going to open does not implicate any of the factors that we adjust Nicole memo one of the questions that arises with regard to marijuana limited Czar's is how far does this run when is a marijuana related business not a marijuana related business and what the guidance on this and it's a question we hear in our practice is that if it's an entity that is really engaged in other things and it just happens to sell chain-link fence to a somebody's marijuana come even it's not a marijuana limited SAR however our understanding is that a good bit of what's being put together here is a way for the federal government to gain expertise in looking at and regulating this industry and the way it does that is by getting the fullest picture of all the people who are involved so it doesn't hurt to bend over a little backwards and file besar because it helps the government get a better idea and get more comfortable with how it regulates the industry yeah and and you have to bother me if you don't file that marijuana's limited sergeant sin is going to be nia and you're going to have a whole lot of trouble the next one marijuana priorities are this is when you do have a reasonable basis to believe that one of the Cole memo factors are implicated or otherwise violate state law now this has not been exhausted and it's taken from the guidance that Simpson put out it's absolutely a must read for any financial institution or financial service company or even a merchant that's looking to get banked to understand how the financial institutions look at them and look at this industry and so this is just sort of a subset of the the red flag that an institution should be looking for but their pre detailed and so for example they ask an institution to note that there's a red flag if the business route has revenue levels that are higher than projected or higher than local competitors were higher than the population demographics or higher than Lenny limitate that you'd expect their limitations imposed by the state she's asking the institution to have a detailed an intimate knowledge not just of this particular merchant that you're planning to board but the entire industry that the industry within this state and the competitors and the population the limitations of the state law they need you to understand this in great detail this ties into a couple of other things that you'll you'll hear this in the theme it requires a level of sophistication that a lot of the banks that we see starting to get into this industry do not have at the beginning as Michael said it requires you to know all of the the entire industry as a holistic project and then to know if any of your when any of your customers get out of their normal business projections revenue anything that's out of the ordinary because those are the things that the regulator's are going to look for when they come to audit to to exam you SOS a company and as a bank and what it tells us is that there needs to be very great cooperation and open communication between marijuana industry participants and their financial services institutions and I just change the slide to add more examples of red flags you know one thing that's not on here that I just makes me laugh when I read the guide it's the smell test I'm not I'm not familiar with any other sort of red flag based on a smell test but FinCEN said it's a red flag if the customer seeks to conceal even its involvement in marijuana related business for example using a nondescript name no marijuana in the name that the poor so engage in commercial activity but then deposits cash that smells like marijuana so you know that's that's a new one to me but I do I think it shows the extent to which since then is expecting the institutions that get involved in this business to be involved in every possible way in to know their customers was one of the ones in it that I thought from the other direction struction is the first one marijuana priority sorrowful business fails for these documentation of a proper licensure that to me seems like it almost ought to be in marijuana termination sorry yeah because you cannot the bank cannot take the risk and a merchant should not begin to think of banks should take a risk because what happens in this game is one of the downstream suggestions by fencin is that banks involved in any financial institution regardless of type that's involved in the marijuana business provide information share information through USA PATRIOT Act section 314 D you can get into later and that means that if Michael's bank terminates somebody because they still produce documentation private partner licensure and they come to my credit union I ought to be able to know that immediately to a 314 B structure and that's where we are now Michael well that's right I mean this line is pretty much covered but that does the third SAR that requiring file is a marijuana termination and so they do terminate a relationship you're supposed to notice Rebecca Starr and the 340b is an option that they can consider that and and I agree with that I don't think that should even be a termination I think they just shouldn't even board Thanks shouldn't be boarding merchants that can't provide docu
entation that they're properly licensed I think that should be a non-starter I can go back to the previous slide I just want to point out this our time and it's 30 days for marijuana limited SAR the continuance are over 90 days again that says that should be no surprise and again for a priority sorry 2:38 as well so you can see the timing hasn't really changed and beneficial ownership this is a from a new requirement on thanks and it really doesn't fully come into effect until sometime in 18 hold on a second I'll give you the exact date as I noted it down Oh what it requires is for a bank that opens an account even an account with a a an ongoing customer must get a certification from the from the customer of who it's beneficial owners are and that means 25 percent or greater than official owners or a single individual with significant control and he's the effective date I said the compliance date is May 11 2018 but it goes into effect much earlier this should be fairly easy in the marijuana world because of the licensing requirements we've not seen any licensing requirement that doesn't request significant transitional ownership and background information so the financial institution you should be getting that and be able to demonstrate about the owners and beneficial owners their identity and background their experience in business regulated non-regulated experience and financial institutions financial health credit rating all that sort of stuff what you're trying to do and what what we have seen in our practice is that the the desire is for the financial institution to have a very detailed knowledge of the people coming in to bank them should be fairly easy in this world but it's one you're going to have to keep track of and you'll have to start filing and I've been do course certificates that you have with your regulators that you have gathered the information necessary under the beneficial ownership rules Michel articles option Washington State for example in February 2014 d Fi and Washington issue good because they got is they chartered banks and credit unions if you if you haven't read it you really should it's it's it's kind of a survival oh they recommend the FinCEN VLJ guidance and they said that Washington will following and then watched and received a letter from the FDIC and 2014 concerning confirming the FDIC examiner's will also follow FDIC of course is involved here because these are state chartered banks and credit state chartered banks credit unions will course be examined by NCUA or their own state the D F I gave a presentation were recommending thanks married to regulatory concepts and this is what we talked about earlier we started if this is one of the places we picked up this idea that the system of prosecutorial priorities based on the coal memos really are not a they're not some they're not processed or priorities alone they are hard and fast rules for you as a financial institution to make sure that you can say that you have asked and your customers have adopted policies that prevent those concerns from happening this puts a lot of focus on the cost of internal compliance at banks and it is a as the Washington State dfi if I says it's expensive and you have to price it accordingly you need to price it out the right way what we've also seen this game is that people have not yet and some of them some of the EFI as we've looked at seem not to be understanding the total cost of what this game means and they Anna and we suggest that as a financial institution if you're going to get into this that you really take the time to price through all of the due diligence efforts the enhanced due diligence for example that washington d fi talks about and the final thing that we found really fascinating out of the washington d fi is that credit unions will likely not be able to look at any assets of a borrower in event of a borrower's default of business failure and as mike with this justice department background quickly pointed out the reason is that all those assets are going to be feast this person will are stepped outside of the the state allowable activities and will be caught in the federal web and one of the things that's going to happen is the assets will be seized and frozen and they will not be available as collateral mike genu what I add on that now I think this is a taking kind of tissue though go yeah let's look they will let's take a second on what Mike just talked about then we'll pick it up again later as we talk to regulators outside of Pinson choose some of them and these are some fairly senior people in the federal regulatory world they they view the defense in requirements as kind of almost as of course because they see them as a subset of their goal which is the safety and soundness of the banking system at state and federal levels so they expect and their concern is is illustrated by this lending issue if you're a bank you're expected to have safe collateral for loans well we've just been told that collateral pledged and for marijuana loans is likely not to be there when and if the time comes that is a direct threat to the safety and soundness of the Federal Deposit Insurance Corporation for example for their corporate Fisk and it's something that when I talked to Pete with a little federal regulators of being so tough we're following the guidelines what echoes in my head is you're you're solving for the wrong problem you have to solve for the safety and soundness issue as well as the fencin issue this slide simply shows the vulnerability that banks and other financial services companies have with respect to this issue operation choke point was a enforcement initiative that I created along with the handful of others when I was at Department of Justice and it was an effort to prevent mass marketing fraud schemes and by doing so by focusing on what we perceive to be the choke point or the bottleneck of the problem which was the financial institutions and payment processors through which all the the bad actors and bad merchants were flowing so it's really no different in the marijuana-related industry to be expensive except you have bad actors here they're all going to be flowing through the financial institutions and you if you're a bank or you're another financial service company you need to keep an eye on this issue the last bullet point is the Millennium Bank consent or the gesture announced publicly with only find in March of 2016 we're going to address that a little bit later in handful of slides but that is a good example of the fact that had its peak held in the fire for its relationship with marijuana businesses and again I just got a piece in AML I was afraid even asked me to do this now this is a I started in this world actually before there was a fence in Oh with the Bank Secrecy acting and working on the initial papers the formation of fence in four years we've talked about the four pillars of an AML program designated BSA officer Bank Secrecy Act officer appropriate training internal policies procedures and controls and an internal audit independent audit rather excuse me these are things that we still are surprised in our practice to find people not taking seriously let me walk through each one a dedicated BSA officer who frankly has no idea what her duties are really has never been trained in what the Bank Secrecy Act requires we then go from a good decent Bank Secrecy Act officer to someone doing training in the area to train the frontline tellers they don't really understand when a a currency transaction report must be filed they don't understand when there might be exemptions and these things come out very quickly in an in an audit then the internal policies and procedures and controls which start with and we'll talk about this later an appropriate risk assessment which we find is kind of a first thing ask for it or not it then how do you onboard are you catching that beneficial ownership information in a way that you can reflect that you've done it to your bank examiners are you are you paying attention to the cola factors yes are you paying attention to the Col factors are you walking your way through and using those as as affirmative compliance standards not just things to be worried about the Col factors then the fencin guidelines how do you conduct on the ongoing monitoring we have found the co-payment this is real direct about this we have gotten central Klein a potential client calls us and says just send us some policies and procedures and a standard risk assessment and we say we think you need to find another set of lawyers sure we could give them cookie cutter stuff but unfortunately for all of us the major firms in this country that do a lot of Bank Secrecy Act work are well known to the regulators and they will see that and say what were you doing so we have to be careful because in this game we are as much in it as are the financial institutions and the the merchants some of other people in the marijuana business this continues to ongoing monitoring there's got to be a policy and a procedure Inuk and a way of showing the Vectra seizures all of a control mechanism same on CTR filing and on SAR filings the start filing from this game are owners they take a lot of time but they have to be done consistently CTR filing as well then see duplicates cash business of bringing in loads of cash you got to make sure that you are monitoring that closely you've got them filing them on time you're aggregating when necessary and so on good point line okay the effect of the Cole memo and FinCEN guides well if when you read the Cole memo it doesn't make you take this very seriously I think you're in the wrong business same with the pen pen guidance the first thing is that the risk of self us from a bad self-assessment Rises it is imperative that as a financial institution you understand the risks and the risks are going to differ by every merchant or every supplier in the industry because they have different experiences for example Scott's just said it's going to get into the hydroponics business for marijuana that is a hundred and fifty year old business interesting track record but it has no experience in this world so how do you how you risk it how you're accession what risk rating do you give it those are things that regulators are coming to our financial institutions and saying we would like to see what fractures you took into place what documents you looked at and how you came to your reasons position same with the KYC process and the customer due diligence it must be more sophisticated in this regard we're seeing kind of an interesting mix we're seeing more marijuana banks that are smaller banks and frankly lack the sophisticated electronic systems at some of the larger banks Michael talk about this later that what we're looking for is is the right fit on electronic systems for banks the CTRs are filing requirements as we just discussed increased exponentially and then we have a revised policies program procedures as necessary and one size guys does not fit all if you look at a at a group of bank all adopted the same procedures trust me the regulator's will see it and they will say these were cookie cutter approaches sent out by save the state group or whatever and nobody took time to change them Mike you weren't talking to yell point out that this is the second bullet point on the practical effect of the cold metal and tinted guidance that's really where the millenium consent order came down it was on funding practice and we'll get to this in a second but they talked about the IT staff and sufficient staffing and reporting structure and so on that's where the regulator's are focusing on and that's where they did focus on in the Millennium case and again we'll get to that in just a bit all next we're going to be addressing risk-based assessment this is the beginning point of every financial institutions policies and procedures and as each pronouncement by regulating any level including Justice Department's a certain customers pose a higher money-laundering risk because of the nature of their business occupation or anticipated transaction activity this ties back to Michael's point earlier on the proceed in the in our program that the bank needs to know what is the expected flow from a company how are they going to be transferring their money to you in what sort of a time frame what sort of of a process one of the prior occupations of these people how do they fit into the business genican said earlier part of what's going on in this case is it is to take two steps back and say the regulator's Benson and others are looking for a way to get a handle on how to make sure that the legitimate Carolina business is just that they know that they're going to have to answer a lot of questions that aren't having to answer a lot of questions to their lords and masters in Congress at the committee level and the staff level and in working with their Justice counterparts now thanks and financial institutions still after exercise judgment this is not a situation and we're getting more to that situation where banks cannot just be risk of the class we've seen that a lot in the financial money transmitter world and we see we think the same thing is going to happen in the marijuana business eventually on them it'll come after the money transmitters are taken care of but regulators are looking for banks and financial institutions to be more sophisticated as they review customers in terms of within an industry because they don't all pose the same level of risk this gets into what kind of services are they seeking what's the source of funds geographic location all those things get into it that requires great record-keeping it requires good industry statistics which we think do not yet exist but are coming getting better and it also be done in the context of federal and state guidance the last point on this slide is one that we internally talk about a lot what is an effective customer due diligence program in the marijuana business is it automatically an enhanced due diligence program perhaps but it does require we can say it with effective , and ongoing , customer due diligence program and the first time that just as matter has really been brought to task is in a is in an order that interestingly does not mention marijuana at all I think was the American Banker that that track says the Millennium we're actually involved marijuana and to to make my point on safety and sound its involvement in it that is in the first line of the consumer unsafe and unsound practices Mike yep that's right there it says the millennium bank details of the unsafe and unsound banking practices and violations of law regulation Malaysia has been committed by the bank including those related to the BSA this consent order is basically a regulatory Smackdown of the bank yeah it's um it requires a bank and it's ia peace of mind event that's worth noting as well the institution affiliated parties but it requires the back of the eye ApS to basically undergo a complete change of its bsa/aml policies and procedures and CDG program requires it to take another look at its staffing the CDD program requires a risk rating of individual customers focused on the type of products offered the volume of the account the location served requires the back to monitor suspicious activity including normal and expected transactions requires the bank to issue revised guidance for resolving issues for when insufficient information is obtained and requires periodic risk-based monitoring of customers to ensure accuracy of the risk profile the requires revised guidelines about the opening and monitoring of new business accounts and the filing of all required reports requires a revised BSA compliance program with oversight by the FDIC and new internal controls including the monitoring the policies and procedures it requires the the bank designated senior official to be responsible responsible for b.fa compliance with the requisite experience and authority with direct reporting allowing the board of directors the requires there to be adequate staffing with numbers of staffing in the experience and make sure that everybody with bsa/aml responsibilities is evaluated to make sure that the
possess the ability experience and try necessary to undertake those requirements now this includes all staff the BSA responsibilities it applies to colors it applies to couriers it applies to IT staff and customer service anybody anybody within that Bank that touches of BSA has to be evaluated to make sure that they have the requisite ability experience and training the bank has to have revised guidelines on accurate record-keeping form completion and detection of suspicious activity and this needs to be updated at least once a year the the FDIC and the also a division of banking really left no stone unturned in this consent order and as I said it was a complete smack down of everything that Bank was doing one of the things that's whether several points I think that we ought to make about this and they're pretty obvious and I would suspect everybody listening this hears them as well one the cost of this is astronomical and we talked earlier about having the price appropriately this this consent order is a as I read it the dollars just kept rolling up in my mind not the least of which was how do you find experience BSA officers we've had clients here and I'm sure other law firms who perhaps on this call but people I know have been in the same situation with where their financial institutions clients have hired over 300 new BSA personnel BSA related personnel as a result of Bank exam that was a fairly good-sized Bank but by no means one of the 10 largest in the country we've seen it at every level and that comes back to the earlier if you're going to get in this game you need to make sure that you're getting the right information and your pricing how much it's going to cost you to process it keep good records about it updated etc because the staffing grows more what we have seen is it's not growing it doesn't grow by onesies and twosies it doubles and triples it's more than an arithmetic progression and the cost of that needs to be taken into account as does this idea of how are you going to to find and train as what we've seen across the country is frankly there is a shortage of people who can evaluate whether Luke investigates ours can look at whether it's our to be filed and those are things that that people in this business in particular are going to get hit with huge financial cost about the last thing I want to say about it is they've got to be good fallback plans the consent order mentions in it's something that's rarely talked about but you've got to have a fallback three or four your electronic systems it's something it's a succession plan for the people but it's also a disaster recovery plan for your financial systems there's got to be good backups all right now we're going to get into best practices a lot of what we discussed already I think could fall under that best practices advice but here are some things I guess everyone should take this security we've been we've been down this road multiple times so important attitudes yes there needs to be a good file every documents in the state application and evidence that you reviewed it it's not just good enough to get the state application throw it in a file the regulator's going to want to say what did you do with it what did you did you check something did something bother you how did you use that in your risk rating for that particular customer how do you how is having your policies and procedures take into effect the requirement that that business comply with the Cole memorandum priorities and at one point we actually want to address this to the merchants who are seeking a banking relationship because as ad said at the very beginning we're all in this together so it's not enough for a bank to understand its obligations and responsibilities but if you're a merchant and you're looking to obtain a banking relationship in this environment you need to understand what the banks are going to be looking at you need to understand what they're going to ask you when you walk in that door try to fill that application so you're standing the Cole memo and understanding the fencin guides what they're going to be looking at is going to help you go a long way towards you're getting that relationship so you know understanding the documentation the bank is going to ask you for and have that ready readily available and show that you are a legitimate business and you're complying with the Cole memo and the pension guidance in every way I think that last bullet point almost 8300 um particularly relevant now we've been reports from the news lately about increased audits by the IRS into these Mr B's and their 8300 filing responsibilities and whether or not they are actually complying if you're a marijuana related business if you're a merchant you have to file an 8300 if you are accepting a cash transaction of greater than ten thousand dollars it is the log you need to do it and if you don't do it you could get in trouble by the iOS or even Vincent there is an MOU a memorandum of understanding the sign between the IRS and FinCEN that allows them to share information now it's not uncommon for federal agencies to enter into such mo use but given the culture and given the environment that we're in today with a millennium consent or with the reports of the increased audits by the IRS and 8300 filing I think it's safe to say that this industry is being washed carefully now that's not to say that you can't do it and we bought through a number of ways in which it can do it you can do it in a lawful and perfectly well lawful Alisha's respect to the in accordance with the guides that have been issued and in a way that won't get you into any trouble but you need to be careful I think that's something that's important to note we come back up toward to the third bullet which is something we have seen in every industry where ESA applies an ongoing culture of compliance and professionalism that is required we've done a series of client alerts about these are available through the Venable web page where the head of the SEC the head of the ephemera the their self regulatory the heads of the various federal funds functional regulators and each said this starts at the top it starts with the with the owners of a company in the marijuana business and mr marijuana related business showing that at the top they take Bank Secrecy Act issues seriously we've seen on the enforcement side a growing number of individuals be hit with personal either bans from an industry or fines or was there one man I'm looking I'm looking across the table first you can't see this but there was one criminal jurisdiction where wasn't really is but we're seeing it across the board and what the regulators are saying is we want to see that the boards of directors and senior management take BSA seriously that the reports are to those seniors people their handle they're not just put in a in a drawer but they're they're looked at they're reviewed and there is a response to them to the people who are in charge your compliance officer wherever it is so that's what what the regulator's are expecting to see in the financial institution world and I would submit you that in this game because of the amount of focus that's on it that if you're a marijuana merchant and you can demonstrate that culture of compliance to your bank you're going to get a bank and you're going to be charged at a cheaper rate then would someone who maybe shows that they comply but don't show they have the dedication to it now you have the next one we've got over multiple times we'll catch you at the beneficial ownership same with with these next from the revenue and deposit projections because preparing those and then having an activity review having activity review procedures that can go through those revenue and deposit projections to see if they match up to reality is going to be is a way that you as a bank can save money you as a merchant can show to your bank that you're being active we give you an example from another world we represent a bunch of contractors in Afghanistan and they get large financial payments for their contracts so I guarantee it the ones who went in to see their banks before they started getting paid and said gee mr. banker I'm about to receive a $350,000 payment from Afghanistan and here's why and here's the copy of the underlying contract got their money a lot quicker than the ones who went in afterwards to try to explain where that $350,000 from some unknown Bank in Afghanistan somehow appeared in their account you can do the same thing here you need to maintain good data know your merchants if you if you're banking a merchant know the merchants supply chain if you're a merchant be able to explain your supply chain to your bank be able to say who with whom you're dealing and how give them a sense of where they are in the industry we've watched this in particular with money transmitters recently there's a one particular credit union that banks a number of money transmitters and they do it does a wonderful job of having all of its information ready on each money transmitter when the regulator's come in after a stumble the first time we've ever had this they've now learned it and they are industry leaders and really fun to work with all right I think we've left a little time at the end too for people to write in I get the chat room for questions if they don't want their questions asked and answered during this webinar they can always feel free to get in touch with either ed or make the information that's on the screen now um while we're waiting to see if there are any questions that come in I just think it's safe to say yeah we and I represent a number of clients in this industry whether it's banks or merchants or others and you know I speak for head but I think they're terrific people we're doing terrific work and just you know trying to walk the minefield of law conflicting law and regulations and statements that we've seen out there today we all wish there were more clarity in this industry and hopefully we're going to get there one day but I think in the meantime there are ways that people can be involved in this again without getting into any trouble like looking at the Cole memo when the pen son guides which we've talked about all the time by using sort of the common sense that's been a part of this industry for many many years now the BSA the felt hasn't changed and if you are familiar with how to do due diligence and do a proper risk assessment and how to manage your risk in a variety of high-risk areas whether it's marijuana or other industries that are out there today I think you can do do this work safely and soundly and go in a problem and I'm like I think I agree with that I mean and we've I would say one of the the hopes I have for the industry is that some of the the clients that we work have been are doing incredibly good and furious work at ways to reduce the burdens of compliance on the marijuana industry oh they worked long and hard and it gave great expense to come up with ways that helped the marijuana merchants and move the regulator's state and county and the federal banking regulators see a way to make this work in a way that hopefully eventually will lower the cost and make sure that is an industry in which the law enforcement and the public policy makers in our country can have confidence because absent that confidence it's not going to grow it will always be somewhere in the periphery in questions we've not seen any questions what to say thank you very much for your time today and if you have any additional questions of course our emails and phone numbers are on the screen and you're welcome to contact us thank you very much you you
